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Why Solar Net Metering is Winning Over the Homes in US?

Posted on July 28, 2019 by Sanghamitra Sinha Chowdhury

The United States is the paragon of development at par globalization. Time and again, it has forged many such axioms for its natives to open up to the path of sustainable or renewable energy.The solar net metering is just another such mechanism, at maximum fluidity in the households of United States today. A country that is currently enveloping 50 states with more than 126 million households are proudly boosting the enactment of this solar incentive. Solar net metering is by far the most common way that reimburses US homeowners for adapting to solar energy. In recent times, the solar net metering policy has joined hands with what is commonly known as distributed generation or on-site generation (OSG), through various sources like, Solar panels, Natural gas micro-turbines, Methane digesters and Small wind power generators to facilitate the act of electricity/power consumption. While the scale of utility customers using net metering in their homes are surprisingly upsurging, 2016 has been evidently the most significant year in terms of growth; for generating over 2500 MW of electricity. Sundry of states and territories, added with Washington D.C adapted them to this renewable practice. Idaho, Texas, Arizona, Georgia, Hawaii, Indiana, Nevada, Maine and Mississippi are the ones imitating the net metering rules along with their state-wise electricity distribution compensation rule. Having informed all these, now I want to take you into the depths of this solar net metering policy.

What is Solar Net Metering?

Solar net metering is an extremely useful concept that enables residential and commercial solar users the power to sell unwanted or extra electricity back into the grid. According to this billing mechanism, the solar energy system owner gets credited for the amount of electricity that he or she sends back to the grid. It works vice-versa. Net-metering your home, gives you the facility to generate your own electricity cleanly and efficiently. As a matter of fact, the majority of the US homeowners produce more electricity through solar during the daytime than they consume. Thus, net metering is the technique that allows you to export power to the grid and reduce your future electricity bills. Give it a thought yourself; what if you can make use of the ‘surplus electricity’ from your home at times? And utilize it efficiently on grounds of inadequacy? Wouldn’t that be a great decision to deal with your home power deficiency? This retail net policy was actually designed for areas with low solar adoption.

How Solar Net Metering Works?

The internal mechanism of this regulatory model is very simple. Suppose you have set up a solar panel system atop your house, your solar panels actually produce more electricity in the daytime, than you use. Now using the solar net metering system means, you will be charged monthly, on the basis of your ‘net’ electricity consumption. That is the difference between the amount of electricity produced by the solar panels and the amount consumed by you. The remaining electricity traverses back to the local grid. The way of its traveling back is – from the inverter to your home electrical panel – to the utility meter – then finally to the utility grid. Net energy metering or (NEM) basically balances well the ups and downs of your home energy production and usage. You can drag the excess amount of electricity to yourself when needed, this facilitates the act of utility billing with added credits on the net number of kilowatts per hour that you are returning to the grid. Apparently, the electric grid, in this case, acts as a giant solar battery. The energy metering policy accredits all US homeowners/ solar panel installers that their solar panels generate at the same rate that they would pay to their utility. What we get as a result is approx. ten thousand dollars of reduction on your electricity costs over the entire lifetime of your solar energy system.

Benefits of Solar Net Metering

1. Net metering can save homeowners hundreds of dollars on their utility bills every year, here is where the actual benefit of solar net metering lies

2. As the solar system generates electricity at par the point of its usage, this causes a reduction in the grid’s distribution and transmission infrastructure

3. Minimizes energy loss from sending voltage many miles from the nearest power plant

4. Many net metering cost-benefit studies have found that, it is equally useful to all non-solar electricity customers

5. Net metering policy also enables you to make money at a retail rate through the excess electricity generated

6. Using this system is an easy process

7. It enables people not to install a second meter or an expensive battery storage system

8. Acts as a protector of the natural resources

9. Saves utility company’s money on meter installation, reading and billing costs

10. Reduces need for huge tract of land for upcoming power infrastructure

Challenges of Net Metering

Despite having so many utilities of this net-billing mechanism, there are a few hazards faced by the consumers. Below are some common examples:

1. Fluctuation and imbalance in the voltage

2. Electrical disturbance during peak hours

3. Transmission of unwanted current in the grid

4. Unintentional islanding

5. Reverse power flow

Net Metering Policy

These are the policies that allow the distributed generation customers to sell their ‘unused’ electricity to a utility at a retail rate and receive credit on their utility bill. This mechanism creates a counteracting effect on the customers’ electricity consumption, which in terms puts a bar on the customer’s purchase-amount of electricity from a utility. A larger number of states are now able to meet their renewable portfolio standards (RPS) since they have specific prerequisite for distributed generation. Majority of the states are now adapting to different approaches to authorized net metering with variations in capacity limits, eligible technology, net metering credit retention, and renewable energy credit (REC) ownership. If you need an in-depth insight to the net metering policies, kindly follow the DSIR. I would like to cite the example of California, enacting the legislation authorization of “net energy metering”. In Florida, net metering has been defined as "a metering and billing methodology whereby customer-owned renewable generation is allowed to offset the customer's electricity consumption on site." Also, a majority of states have shifted to investor-owned utilities. People are also adapting to capacity limit based on customer demographics. For example, West Virginia has established different limits for commercial, industrial and residential consumers, which are then based on the size of the utility serving the various customer demographics.

Types of Net Metering System

In recent years, the types of net metering policies have been divided on the basis of their customer-consumption behavior. While distributed solar energy has been growing by leaps and bounds in the U.S., with close to 70 percent growth among residential installations alone.

1. Conventional net metering – also known as individual net metering, connects a generating source to a single meter (house/building). Latest trends in solar net metering policies enable users to connect their generating sources to multiple meters or properties.

2. Aggregate net metering – this is for the people who cannot benefit from conventional net metering. It has got authorized net metering for new customer types. Including non-profits, multi-unit residences, multi-property owners, renters, municipalities, and others.

3. Virtual or community net metering – the unfortunate part is, the low-to-moderate income households of USA are being deprived of using the distributed net metering system, as a matter of fact, they are actually the ones paying higher tariff over electricity bills. This is where community net metering comes into play; this model allows all LMI residents to benefit from the cost savings of distributed solar energy projects.

History of Net Metering

The origination of this power- utility scheme happened in the United States through the hands of solar panels and wind turbines. The solar homeowners wanted to “preserve” their energy somewhere and use it afterward when necessary. Minnesota was the first state ever to pass the first state net metering law in 1983, according to the law, if anyone generates electricity less than that of 40 kilowatts, their credits might roll over to the next month or be paid for the excess. The year 2000 saw the amendment to compensation "at the average retail utility energy rate”. This is regarded as the most general interpretation of net metering. It also allows small producers to sell their electricity at the retail rate. The US denizens in 2005, were required to offer net metering "upon request". On an average, only 30% to 40% of a solar energy system’s results go into the grid, and this surplus solar electricity serves for the local customers’ loads. Till 2013, 43 US states had adopted the practice of solar net metering policy. A majority of the US states are running rapidly with a growth in their states administrative net metering policies. As we have witnessed it in 2015, 44 states and Washington, D.C. have introduced compulsory net metering rules for at least some utilities. A few utilities are held to be compensating at full retail rates.

Worldwide Adoption?

As of 2018, the United States stands at the fourth position, with respect to solar energy utilization; after China, Japan & Germany. The list of states to receive an "A" rating from freeing the Grid in 2015, are Arizona, California, Colorado, Connecticut, Delaware, Maryland, Massachusetts, New Hampshire, New Jersey, New York, Ohio, Oregon, Pennsylvania, Utah, Vermont, and West Virginia. Now let us have a look at the worldwide adoption of the solar net metering system by far.

1. United States – United States has a rate of 40,300 MW (13.3%) of solar PV installation. California saw the continuation of retail net metering with minimum changes for rooftop solar customers, the year 2017; California led the implementation of "Net Metering 2.0" in which the compensation worth of solar customers stands parallel to the retail rates. In October 2017, The California Public Utilities Commission (CPUC) did an expansion of the “grandfathering period” for several of the distributed PV systems and withdrew the completion deadlines for “qualifying PV systems”. The so-called grandfather rates will last five years for residential and ten years for other customers. The United States began utilities with Idaho in 1980 and in Arizona in 1981 to power the wind and solar energy. In recent times, Illinois, Florida, Nevada, Georgia, Kentucky, Michigan, and Massachusetts are also doing the rounds.

2. Australia – Certain parts of Australia are known to the net metering policy in the name of the "feed-in tariff". These days, almost all new systems are installed with a net metering setup. Brand new installations of solar PV took place, at large in all Australia’s households and businesses from January to March 2019. This year saw an average increase of nearly 47% with respect to the aforesaid period. The states’ introduction of incentive schemes worked as a catalyst in Victoria which up-surged its installation to approx. 90%. Since 2009 onwards, the houses of Victoria were credited with 60 cents for every excess kilowatt-hour of energy that they are able to send back to the states’ electricity grid, which amounts to up to three times the retail price for electricity during the aforesaid time period. But in recent times, the feed-in tariffs reduced to somewhat as less as 5 cents per kilowatt-hour in 2016. Australia’s total electricity production stands to 226.8 TWh in 2018. Thanks to the feed-in tariffs and sustainable energy targets by the country that bolstered renewable energy commercialization and rapid increase in solar capacity. The 1 MW Uterne Solar Power Station was the first commercial-scale PV power plant, opened in 2011. Prices of solar PV continued a downfall until in 2013, when the cost went being less than half of using grid electricity in Australia.

3. India – Done with the notion of making distributed energy more accessible and economically reliable among electricity consumers, India’s’ net metering policies are highly inconsistent in many ways. These inconsistency measures are lately imposing a challenge on India’s rooftop installers. For example, Gujarat doesn’t allow its natives to opt for a third-party-owned installation. This creates a haphazard situation for homeowners who cannot invest in their rooftop solar from via their own capital and also for the rooftop independent power producers (IPP). In India, majority of the states, go for third-party owned or an OPEX based rooftop solar projects in their policies.

4. Europe: Although Denmark proved to be an ideal region for the adaption of solar photovoltaics; cheap and easy to install. In recent times, the installation rate of solar photovoltaics somehow plummeted to an average scale. So much that two of the major markets like Italy and Germany have declined the deployment of solar PV lately. This year, 2019, will witness the onset of solar net metering practice for all ‘privately’ owned systems, the royal decree having being accepted by the government on April 5. The most considerable year in the history of Europe has been 2013 in terms of solar power deploying capacity. Europe stood as the worldwide leader of this technology in 2013, with nearly 60% of the worldwide contribution. According to the European Photovoltaic Industry Association, Austria along with some other mid-sized nations is likely to contribute to the European PV deployment in the coming years. Germany is the proud home of many big PV power plants like Senftenberg Solarpark, Finsterwalde Solar Park, Lieberose Photovoltaic Park, Strasskirchen Solar Park, Waldpolenz Solar Park, and Köthen Solar Park. Germany’s name falls among the top 4 countries, in terms of solar PV deploying capacity and number one regarding per capita installation of PV.

5. United Kingdom: Until 2010, solar power in the United Kingdom occupied a very lean strip on grounds of electricity generation. It is since 2010 that the falling cost of solar panels and increased feed-in tariffs pivoted the growth of solar installations in the United Kingdom. By far, a total number of approx. 14 GW of capacity of solar power has been installed here and the Shotwick solar farm is the largest in the entire UK. However, the climatic factors being not favorable much dragged down the peak installation capacity of solar power to less than 10 GW. The year 2017 represented the three-fourths of total power generation through the UK solar PV installation of nearly 13.8 GW. Though the most memorable record was that of May, this year with an average of 9.6 GW. In 2012, the UK government took the initiative to convey its envision of powering nearly 4 million homes in the upcoming eight years, which equals to a total installation of nearly 22 GW of solar power by 2020.

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